Sep. 22, 2012: A note on the role of the broker; input on agency sales caps; lender updates

Sep. 22, 2012: A note on the role of the broker; input on agency sales caps; lender updates Rob Chrisman

Thursday the commentary mentioned a note: “I worked with a guy who did so many immigrant loans and made so much money years ago he named his daughter after the Nina, As in No Income No Asset.” I received this: “I, like many others I assume, have a college daughter who is ‘a NINA.’ She has no income and has no assets.”

And I received this note regarding business lines. “Rob, why is the press always bashing brokers? The press needs to remember a few things about the broker business and brokers. First, many believe that a broker is a borrower’s best source for locating the most aggressive price due to their broker’s ability to manage costs associated with the loan process. A broker typically manages active relationships with five wholesale lenders so that they have access to an array of mortgage products that can meet a variety of challenges borrowers are faced with in finding the ‘right loan program’ or solution. And a brokered loan doesn’t close without meeting rigorous compliance checks and underwriting standards from their wholesale partner – compliance, quality, and funds are still managed by the wholesale lender. Lastly, the industry shouldn’t forget the licensing standards for a Loan Officer who is in a ‘broker affiliation.’ State and national licensing, and continuing education, is a mandate.  So the consumer gets a well-educated mortgage professional.” Thanks for the note!

I also received this about the potential agency sales caps and industry in general. “I am a 20 year veteran of the mortgage business and this is the third mortgage company that I have built or re-engineered over my career.  My companies have never originated a subprime loan.  In fact, I openly scoffed at the Bear Stearns rep as he insisted that I was missing an opportunity of a life time.   The interesting thing is now I am paying the same price as everyone else and there’s little to no exception for companies that maintained a strong book of business even throughout the financial crises. Specifically, I have to comment about the volume limitations that the agencies are putting on mortgage bankers. I received my e-mail last week from our agency representative. ‘I would like to schedule about 30 minutes to talk over current business and some key changes effecting loans sold to (agency).  Please let me know your availability over the next few business days and I will send a calendar invite.’ I wrote back, ‘Are you going to limit our loans sold to (agency)?’ and received this reply, ‘I didn’t want to come out and say it in the email, but yes, that is the case.  I would like to discuss the details with you before the Addendum is sent to you.  Please let me know when you are available and if there are others that should be invited to the call.’”

The note continued. “Rob, our company was established as a seller servicer in the 1980’s. We have nearly 4,000 loans in our agency servicing portfolio and we are originating 250-350 loans a month.   We are well capitalized based on the agency requirements.  Our 30 day past due loans including foreclosure and loss mitigation are less than .8%. The rep indicated no awareness of a particular 10:1 or 20:1 rule on sales versus capital for existing sellers, although ‘capital is a primary driver on new sellers.’  The rep stated that existing companies fall under a PFE analysis (Potential for Exposure) which takes into account ‘black box’ items (loan performance, repurchases, equity capital, etc.).  Given our stellar foreclosure and delinquency numbers, in our case it appears that leaves one item, equity capital, as a red flag. We were verbally told that the agencies are limiting production based on June 1 through May 31 sales.   We hit the 50% mark of our ‘already established but unknown’ limit within 3 months and this triggered the PFE review. My message to other mortgage lenders is to not assume that you don’t have a set limit already. My guess is that the limit is there and equity capital is a critical component.”

I have plenty of recent investor, agency, MI, and vendor updates. First, I will apologize to anyone who took my comments yesterday about Lindsay Lohan and Amanda Bynes helping me on these – that is not true. What is true, however, is that is best to read the actual bulletin for full details.

US Bank has amended its reserve requirements for interest-only ARM and its Jumbo fixed-rate interest-only products.  Effective for locks dated September 10th and after, the minimum required reserves will be the higher of 24 months’ PITI or $250,000.  Loans currently in the pipeline are still eligible to be processed under the previous requirements provided that they are closed, funded, and purchased by the end of the calendar year. September 1st marked the implementation of San Francisco’s Bay Equity’s revised Early Loan Payoff policy.  The new policy states that, in cases where a loan funded by Bay Equity is paid in full within 210 days of the funding date, the company will be subject to repayment of any yield adjustment credits, rebate pricing, or premium received on the original loan that paid off. Affiliated Mortgage has amended its general requirements such that it is no longer necessary for at least one borrower to have two credit scores and co-borrowers with only one credit score are now permitted to contribute more than 25% of qualifying income.  Co-signers are now allowed, as are properties listed for sale within the last six months provided that they meet the requirements outlined in Section 401.14 in the Correspondent Guide.  New Jersey properties comprising 2-4 units are no longer eligible for AMC products. For all conventional loans, AMC has increased the minimum credit score for cash-out refinances to 640; for investment properties, the minimum score has been increased to 660.  Property transfers within the past 90s days are now permitted; however, transfers within the last 180 days are not allowed on non-arm’s length transactions.  VA products are subject to an increased minimum credit score requirement of 640.  The maximum DTI for VA loans has also been adjusted; for borrowers with credit scores of 680 and over, the new maximum is 55%, while a maximum DTI of 50% applies to all borrowers with credit scores under 680.  All of the above updates went into effect for loans locked on or after August 28th. For those who have been living under a rock, it’s hurricane season!  In light of the recent flooding and tornadoes, AMC reminds lenders of their responsibility to be aware of any catastrophe that could have possibly affected properties in their lending areas.  All lenders must follow the protocol as outlined in the “Disaster Areas and Policies” sections (401.25 and 501.28) of the Correspondent Guide regardless of whether FEMA has formally declared a disaster in the area.  For all loans sold to AMC in areas affected by a disaster, the lender must be able to prove that the property’s interior and exterior have both been inspected, that it is in “average or above average condition” with no repairs required at the time of loan purchase, and that it has maintained the same marketability and value as described in the original appraisal.  The loan will be subject to repurchase by the lender if AMC or a subsequent investor determines that the property was damaged and did not meet the Disaster Area requirements upon being sold to AMC. A few weeks back Flagstar temporarily suspended funding in several counties and parishes in Alabama, Louisiana, and Mississippi on account of Hurricane Isaac, the full list of which is available at (https://wholesale.flagstar.com/Lending/sellersguide/pdf?documentPk834).  Disaster policy requires that all affected properties be re-inspected to verify that there hasn’t been any flooding or windstorm damage.  All inspections should include a photograph of the subject property and commentary on the neighborhood conditions.  FHA and VA properties are subject to both Flagstar disaster policy requirements and those of their respective organizations.  With regard to the RESPA Changed Circumstances form, appraisal re-inspection fees required for properties located in any of the affected counties are considered authorized changed circumstances for an increase to Block 3. After that, Flagstar has released a list of zip codes in Alabama, Florida, Louisiana, and Mississippi in which properties with appraisals dated on or before September 4, 2012 will require a re-inspection to confirm that they haven’t been damaged by Hurricane Isaac.  All inspections should verify that the property and surrounding neighborhood do not have any flooding or windstorm damage and must include exterior photographs. As a general reminder, Flagstar requires all loans that are purchased from its wholesale customers to comply with RESPA, TILA, the Flood Disaster Protection Act, the Home Mortgage Disclosure Act, and the Patriot Act.  For anyone seeking a refresher on the details of those laws, a handy outline is available at https://wholesale.flagstar.com/Lending/sellersguide/pdf?documentPk854.

Wholesaler Pinnacle Mortgage will be implementing a new annual and guarantee fee structure for all loans with conditional commitments dated on or after October 1st. A number of changes have been made to the Pinnacle guidelines for conforming loans.  The policies on carbon monoxide detector eligibility and appraisal acceptability in disaster areas have been clarified, and guidance was added for non-functional pools and spas, multiple tax parcels, charge accounts, and documentation requirements for foreclosures.  A 6-month time frame for conversions to primary residences has been added as well.  Type O visas are no longer eligible, and delegated MI is not eligible on property flips if the LTV is less than 80% and there is less than 20% appreciation within 6 months. And the requirements for Arizona on Pinnacle’s tax impound chart have been updated and are effective immediately.  Pinnacle has updated and clarified its guidelines for FHA, USDA, VA, Enhanced DU Refi Plus, and Pinnacle Plus products as well. In the wake of FEMA’s recent announcement, M&T Bank reminded lenders that properties in Lincoln and Sandoval counties in New Mexico must be re-inspected as per M&T guidelines prior to loan purchase.  The original appraiser should complete the re-inspection, include a photo of the exterior, provide commentary on any conditions that may affect the marketability of the property, and verify that there has been no damage and that the property is in the same condition as when it was previously inspected and appraised.  The re-inspection should be completed using Freddie Form 442/Fannie Form 1004D and submitted to an M&T underwriter prior to closing. SunWest has consolidated the appraisal documentation requirements for conventional flip transactions, which now allow transactions with 20-30% resale increases to be qualified with a desk review.  Transactions with 30-50% resale increase may be qualified with a field review and those with an increase of 50% or more may be qualified using a second appraisal.  Clients are reminded that property flip transactions are subject to an LTV maximum of 80%, a property inspection ordered by SunWest, and a requirement that all structural and health and safety issues be satisfied.  In addition, all transactions must be arm’s-length to be eligible. SunTrust is pushing back the implementation date of its new lender compensation program, which levies a flat fee of 1.375% compensation fee for all brokers.  As per this deadline, loans could have been registered under the current lender compensation agreement up to September 14th; loans registered on and after September 15th are subject to the new program.

Perks of reaching 50, or being over 60 and heading towards 70 (part 2 of 2): 10. You get into heated arguments about pension plans. 11. You no longer think of speed limits as a challenge. 12. You quit trying to hold your stomach in no matter who walks into the room. 13. You sing along with elevator music. 14. Your eyes won’t get much worse. 15. Your investment in health insurance is finally beginning to pay off. 16. Your joints are more accurate meteorologists than the national weather service. 17. Your secrets are safe with your friends because they can’t remember them either. 18. Your supply of brain cells is finally down to manageable size. 19. You can’t remember who sent you this list. If you’re interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses the new CFPB Rule combining TILA & RESPA disclosures. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Check out http://www.mortgagenewsdaily.com/channels/pipelinepress/default.aspx or www.TheBasisPoint.com/category/daily-basis. For archived commentaries, go to www.robchrisman.com. Copyright 2012 Chrisman LLC.  All rights reserved. Occasional paid notices do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)